FINANCIAL ACCOUNTING AND MANAGERIAL ACCOUNTING

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FINANCIAL ACCOUNTING AND MANAGERIAL ACCOUNTING

• FINANCIAL ACCOUNTING
• External Focus Primarily reports results of
  business operations to persons "outside" the
  company
• Reports historical data
• Must follow Generally Accepted Accounting
  Principles

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FINANCIAL ACCOUNTING AND MANAGERIAL ACCOUNTING

• MANAGERIAL ACCOUNTING
• Internal Focus Reports information used by
  management in overseeing daily operations of
  company
• Reports historical data and budgets or estimates
  for the future
• Reports more detailed information
• Not restricted by generally accepted accounting
  principles
• 5. Usefulness to management is guiding principle

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CERTIFICATE IN MANAGEMENT ACCOUNTING (CMA)

• Professional credential available to management
  accountants with a bachelor's degree and 2 years
  of work experience in managerial accounting. (An
  accountant with an associates degree may take
  the CMA exam by earning a score of 50 or better
  on the Graduate Records Examination (GRE).)
• Must complete a 2-day examination covering the
  following
• 1. Economics, finance, and management
• 2. Financial accounting and reporting
• 3. Management reporting, analysis, and behavioral
  issues
• Decision analysis and information systems.
• Must earn 30 hours of CPE credit every year

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FIVE MANAGEMENT FUNCTIONS

• PLANNING develop a course of action to achieve
  company goals
• Strategic Planning
• Long Range (5 to 10 years)
• Policy setting
• Operational Planning
• Short term (1 week to a few years)
• Used to achieve goals of Strategic Plan

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FIVE MANAGEMENT FUNCTIONS

• Directing run day to day operations
• Controlling oversee operations and compare
  actual to expected results
• Improving use information to eliminate the
  source of problems
• Decision Making select one course of action
  over another

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FACTORY
Production Scheduling
Purchasing
WORK IN PROCESS AREA
Receiving
Stock Room
Shipping
Finished Goods Inventory
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FACTORY

• Production Scheduling
• Customer Order Received
• Determine when workers can do it
• Review Bill of Material
• Create Purchase Requisition
• Send Purchase Requisition to Purchasing

Production Scheduling
Purchasing
WORK IN PROCESS AREA
Receiving
Stock Room
Shipping
Finished Goods Inventory
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FACTORY

• Purchasing
• Competitive bids from vendors
• Approve vendors
• Issue Purchase Orders to approved vendors

Production Scheduling
Purchasing
WORK IN PROCESS AREA
Receiving
Stock Room
Shipping
Finished Goods Inventory
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FACTORY

• Receiving Department
• Inspect and Count items received
• Agree to Purchase Order
• Prepare Receiving Report and match to PO
• Move Goods to Stock Room

Production Scheduling
Purchasing
WORK IN PROCESS AREA
Receiving
Stock Room
Shipping
Finished Goods Inventory
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FACTORY

• Stock Room
• Safeguard materials
• Perform Quality Assurance tests
• Maintain Stock-in records

Production Scheduling
Purchasing
WORK IN PROCESS AREA
Receiving
Stock Room
Shipping
Finished Goods Inventory
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FACTORY

• Production Area
• Issue Materials Requisition to the Stock Room
• Fill out time tickets
• Produce the Product
• Move completed product to Finished Goods
  warehouse area

Production Scheduling
Purchasing
WORK IN PROCESS AREA
Receiving
Stock Room
Shipping
Finished Goods Inventory
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FACTORY

• Shipping
• Receive an Approved Shipping Order
• Package the Finished Goods
• Produce a Packing Slip
• Ship Product to Customer

Production Scheduling
Purchasing
WORK IN PROCESS AREA
Receiving
Stock Room
Shipping
Finished Goods Inventory
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FACTORY
Production Scheduling
Purchasing
WORK IN PROCESS AREA
Receiving
Stock Room
Shipping
Finished Goods Inventory
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Job Order Cost System
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DIRECT INDIRECT COSTS

• Direct Cost can be traced directly to a cost
  object. A cost object can be a product,
  department, or activity.
• List three direct costs of taking this course.
• Indirect Cost - cannot be traced directly to a
  cost object.
• Name an indirect cost of taking college courses
  that cannot be specifically identified with a
  specific course.

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MANUFACTURING COSTS

• Direct Materials - materials and component parts
  that become an integral part of the final
  product. These materials can be traced directly
  to a finished unit of product.
• Direct Labor - cost of wages paid to employees
  who work directly on the product.

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MANUFACTURING COSTS

• Factory Overhead - all other costs incurred in
  making the product. These costs include the
  following
• 1. General manufacturing costs that cannot be
  traced directly to the product
• Utilities, Depreciation on machines, Property
  taxes, Insurance
• 2. Indirect Laborwages/salaries paid to workers
  who are necessary to keep the factory running,
  but do not work directly on the product
• Maintenance workers, Janitorial staff, Factory
  personnel department, Plant manager and
  supervisors
• 3. Indirect Materialsmaterials used in the
  manufacturing process that do not end up in the
  final product
• Materials used to test machines
• Lubrication used on machines
• NOTE Direct materials and direct labor costs may
  be treated as factory overhead costs if they are
  insignificant.

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Exercises and Problems
What if he calls on me?!?
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Cost Classifications
Deferred
Prime Costs
Direct Materials
Direct Costs

Product Costs
Direct Labor
Conversion Costs (DL FOH)
Factory Overhead
Indirect Costs
Expensed
Selling Expenses
Period Costs
Administrative Expenses
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Exercises and Problems
Ill pretend I am busy taking notes?!?
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THREE INVENTORY ACCOUNTS
Materials Inventory
WIP Inventory
Finished Goods Inventory
Direct Labor
Overhead
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FACTORY OVERHEAD

• Actual Overhead gt Applied Overhead . . .
  Underapplied
• Actual Overhead lt Applied Overhead . . .
  Overapplied
• At end of year, if the over/under applied balance
  is immaterial, write it off to Cost of Goods Sold
• If it is material, then allocate between Cost of
  Goods Sold, Finished Goods, and WIP

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Exercises and Problems
Avoid eye contact with him?!?